New York State
Ethics Commission


Advisory Opinion No. 94-12: Application of Public Officers Law §74 to the outside activity of a [State agency] employee.

Introduction

The following advisory opinion is issued in response to a request from a current [State agency] employee, who is charged with maximizing federal revenue to the [State agency], concerning whether the ethics law prohibits him from engaging in consultant work to provide services related to the maximization of federal revenue to states other than New York.

Pursuant to its authority under Executive Law §94(15), the State Ethics Commission ("Commission") hereby renders its opinion that Public Officers Law §74 prohibits the employee from performing such services for other states.

Background

The requesting employee serves as a [job title] in the [State agency]. Pursuant to [the State agency] policy concerning its employees' outside activities, the employee requested approval to perform certain consulting services. On [ ], [the State agency], through counsel's office, denied the request primarily because of the conflict of interest provisions contained in Public Officers Law §74. The employee then notified his agency that he would seek an opinion from the Commission. It is to that request that we now respond.

The employee is a [State agency] policymaker with responsibilities for research, evaluation, and development efforts in federal maximization areas pertaining to [ ] expenditures, and for the supervision of staff engaged in related activities. The employee's duties as a [job title] require that he:

. . . .

research and analyze federal and State regulations of various entitlement programs to ensure maximization of available federal funding in the [ ] Program.

. . . .

when required, work with Director to expand the use of the disproportionate share approach throughout non-federal, State and local [ ] expenditures. This will involve working closely with other State agencies and/or local governmental agencies.

The employee would like to work part-time, while using accumulated vacation leave credits, for a private consulting firm that is providing federal revenue maximization consultation services to other states. The employee asserts that he would be utilizing his general knowledge of federal programs and assisting the firm in advising other states with their widely differing plans, requirements and programs.

In its memorandum denying the employee permission to engage in the consulting activity, [the State agency] counsel argued that proposed outside employment would:

result in substantial conflict of interest because this employee would be working in the same field in both his public and private capacities. Stated differently, this employee would be selling for personal gain the same services that he performs in the public interest. To the degree that employees engaged in federal revenue maximization efforts are called upon to interact with, and provide advice to other states, outside employment in this same field would be in substantial and direct conflict with the proper discharge of their duties in the public interest. The independence of this employee's judgment in the performance of his [State agency] duties could be impaired by virtue of his personal interest in obtaining private business. By serving in two capacities, staff involved in maximization efforts may well cause confusion among other states who rely upon this [State agency's] objective assistance and expertise in regard to the proper application of relevant laws to accomplish federal revenue maximization.

. . . The [State agency] has a discernable association with other States, both in its capacity as the single State agency responsible for the administration of the [ ] programs in New York State, and as a result of its singular expertise and leadership in the area of federal revenue maximization.

Statuatory Background

[The State agency] denial of the employee's request to perform such services is based primarily on Public Officers Law §74, which provides minimum standards against which State officers and employees are expected to gauge their behavior. The code is directed at addressing the conflict between the obligation of public service and private, and often personal, financial interest.

The rule with respect to conflicts of interest is provided in Public Officers Law §74(2):

No officer or employee of a state agency . . . should have any interest . . . business or transaction or professional activity or incur any obligation of any nature, which is in substantial conflict with the proper discharge of his duties in the public interest.

Following the rule with respect to conflicts of interest, Public Officers Law §74(3) provides standards of conduct which address not only actual but apparent conflicts of interest. Of relevance to this inquiry are the following:

    . . . .

  1. No officer or employee of a state agency . . . should disclose confidential information acquired by him in the course of his official duties nor use such information to further his personal interests.

  2. No officer or employee of a state agency . . . should use or attempt to use his official position to secure unwarranted privileges or exemptions for himself or others.

    . . . .

  3. An officer or employee of a state agency . . . should endeavor to pursue a course of conduct which will not raise suspicion among the public that he is likely to be engaged in acts that are in violation of his trust.

    . . . .

Discussion

The Commission has held that §74 prohibits a State officer or employee from engaging in an outside activity over which the individual has regulatory or enforcement responsibility. For example, in Advisory Opinion No. 90-5, the Commission found that §74 prohibited a State employee from outside employment as a photographer and copy writer when his assignments included depiction of some of the groups with which he had an association by virtue of his regular job responsibilities. In Advisory Opinion No. 92-3, the Commission found that §74 prohibited Environmental Conservation Officers ("ECOs") employed by DEC from engaging in certain for-profit business activities over which they have official enforcement responsibility.

Similarly, in Advisory Opinion No. 92-12, the Commission found that §74 prohibited Pesticide Control Specialists ("PCSs") employed by DEC from performing private pesticide consulting services when their official State responsibilities required their interaction with persons in need of such services.

Finally, the Commission found in Advisory Opinion No. 93-5 that DEC foresters were prohibited from undertaking outside employment as forestry consultants for persons with whom they and their State agency have an association.

In each of the above cited opinions, the Commission prohibited the outside activity because the State employees had a direct or indirect regulatory or enforcement responsibility over the proposed activity. In the present case, other states are the potential clients for this employee's private consulting firm. Unlike the photographer, foresters, ECOs and pesticide specialists mentioned above, the employee in this case has no regulatory role over these states. However, [the State agency] employees engaged in federal revenue maximization are, from time to time, called upon to consult with other states for a variety of work-related reasons.

It is the view of [the State agency] that, should the employee privately provide federal revenue maximization services to such states, a perception will exist that he is trading on his government position for personal financial gain. In response to the Commission's request for additional information from [the State agency] in supporting its denial of the outside activity, [the State agency] stated:

It is my understanding that while the same knowledge base may theoretically be available to persons in both the public and private sectors, the "inside knowledge" of [State agency] audit staff obtains from their day-to-day conversations with [ ] staff, public [institutions] and federal officials. It is precisely this intimate knowledge of how the system works that is beneficial to the outside employment relationship and gives [State agency] employees an advantage.(1)

Counsel for [the State agency] also cited Sector Enterprises, Inc. v. DiPalermo, 779 F Supp 236 (ND NY 1991), which upheld the discretion of [the State agency] to prohibit employees responsible for the administration of the [ ] system from soliciting outside employment as consultants to develop and administer similar systems for other states. [The State agency] employees designed the system to assist New York State and local [ ] agencies obtain federal reimbursement for payments they make for [ ]. Pursuant to agency policy, the employees sought approval of their outside activity but were denied permission by [the State agency]. They then sued the agency arguing that their solicitation of business on behalf of the Sector Enterprises, Inc. ("Sector"), the consulting company they had formed, was protected "speech" under the first amendment.

In first amendment cases involving restrictions on public employees, the court must weigh the speaker's interests with the State's interests. The Second Circuit Court of Appeals described the balancing test in Giacalone v. Abrams, 850 F2d 79 (1988) as follows:

In evaluating the relative weight of the employer's and employee's interest, we also consider whether the speech impaired the employee's ability to perform his duties, disrupted working relationships requiring personal loyalty and confidence, or otherwise impeded the regular operation of the employing agency.

See also Pickering v. Board of Education, 391 US 563 (1968); Connick v. Myers, 461 US 138 (1983); Rankin v. McPhersen, 483 US 378 (1987); Mount Healthy City Board of Education v. Doyle, 429 US 274 (1977).

In performing the required test, Judge McCurn in the Sector case,, upheld [the State agency's] prohibition of the plaintiffs' proposed outside employment because the State's interests in avoiding potential conflicts of interest outweighed the plaintiffs' first amendment interests. However, in holding that the State had a legitimate interest in preventing conflicts, the Court did not hold that the plaintiffs' proposed activity would have violated §74 of the Public Officers Law. It was not required to make such a finding, since the State's interest to be considered when the Pickering balancing test is applied is broader than only preventing a violation of its laws.

The Sector court specifically did not hold that the plaintiffs' proposed activities were in conflict with their positions. While it did find that there would be an "appearance of impropriety," it did not indicate what standard it was applying to reach that conclusion. In fact, it cited no statute.

Our examination as to whether the requesting employee here would violate Public Officers Law §74 if he were to engage in the proposed activity is, therefore, not governed by Sector. While that case can and should be considered, it does not serve as precedent because, as noted, the standard in applying the balancing test in first amendment cases is different from the standard set forth in §74.

The Commission agrees with the Sector decision in its holding that the State has a significant interest in preventing its employees from engaging in activities that may create a real or apparent conflict of interest. In fact, the overall purpose of §74 is to prevent an employee from engaging in any such activity. Under this section, an appearance of a conflict is present if there is a reasonable belief that the employee benefited from access to official information or otherwise from his or her official position. Moreover, the appearance of a conflict may be heightened by the perception that the activities could have been undertaken while on official duty, using State resources. An actual conflict is not necessary for §74 to be triggered, as this section is designed to prevent even appearances of a conflict.

In the case before us, [the State agency] states that the employee will be performing the same services for profit that he performs for the State. The agency is concerned that the employee might use his State position to solicit or refer potential clients to his private business, thus violating §74(3)(c)'s ban on the disclosure of confidential information and §74(3)(d)'s prohibition against securing unwarranted privileges, as well as §74(3)(h)'s restrictions related to appearances. The Commission also shares [the State agency's] concern that the employee's performing for other entities highly specialized services similar to those he performs in his State job, could cause the public to question the employee's loyalty and service to the public interest, and thus give rise to an appearance of a conflict under §74(3)(h).

Therefore, the Commission supports [the State agency's] finding that the appearance standards found in §74(3)(h) bar the employee from selling federal revenue maximization consulting services to other states. The circumstances described here could create the appearance that the employee is trading on his State position for personal financial gain. Therefore, the Commission holds that the agency properly denied permission for the employee to engage is such an activity.

Conclusion

The Commission does not read Public Officers Law §74 as automatically precluding State officers and employees from engaging in an outside business practice solely because the business is in the same "field" as their public employment. For example, the Commission historically has permitted accountants to work privately as tax return specialists, allowed lawyers to perform certain legal services and granted doctors permission to serve private patients during their non-State hours. These State employees often utilize the same skills and knowledge in both the public and private sectors. For there to be a violation of §74, a substantial conflict must exist with the proper discharge of an employees' duties in the public interest. Such a conflict is found when there is an inherent incompatibility between private interests and the official responsibilities of the person holding a position of trust. Determinations must be made on a case by case basis.

In the present case, the Commission finds that Public Officers Law §74 precludes the employee from engaging in consultant work to provide services related to the maximization of federal revenue to states other than New York.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.

All concur:

Joseph M. Bress, Chair

Barbara A. Black,
Angelo A. Costanza,
Robert E. Eggenschiller,
Donald A. Odell, Members

Dated: June 21, 1994


Endnotes

1. Taken from [ ], letter from [ ] Assistant Counsel at [the State agency].



URL: http://www.nysl.nysed.gov/edocs/ethics/94-12.htm